[SINGAPORE] The Kingdom of Thailand will ease the approval process for foreign bond issuers next year in an all-out move to boost its growing status as a regional funding hub.
From January, the Ministry of Finance will review applications from foreign issuers looking to issue bonds in baht every month, rather than three times a year under the current system.
The shift will give overseas companies more flexibility to access the baht market, in a sign of Thailand's desire to deepen its capital markets.
"Market conditions change so fast, such that we realise that it is not easy for the foreign issuers to sell under the current process," Suwit Rojanavanich, director general of MoF's Public Debt Management Office, told IFR in an interview. "We want to help them and so we are fast-tracking the application to a monthly basis."
The change, welcomed by Thai bankers, will do away with the currently cumbersome application process under which there are only three approval windows opened each year.
At the moment, applications can only be made in March, July and November of each year. Foreign issuers need MoF approval, which could come weeks after applying, and have a nine-month window within which they have to sell the bonds.
This means that foreign issuers could miss any opportunities in between application periods to take advantage of any favourable market conditions. Such missed opportunities are aggravated in times of volatility, as seen in the past few months.
Increasing the application frequency will allow the issuer to re-apply if it misses any opportunities during the issuance window. The issuance window will, however, be shortened to a six-month period.
Thailand's domestic bond markets have stayed resilient amid the global volatile market conditions over the past two months, and some foreign borrowers have taken advantage of it.
The Export-Import Bank of Korea raised 10 billion baht (S$402 million) from the sale of 2.18 per cent three-year bonds at end-August while the Lao People's Democratic Republic sold its largest bond in June with a 12 billion baht dual-trancher.
The Kingdom is actively promoting itself as a viable funding avenue for issuers in Indochina, where underdeveloped domestic capital markets limit funding options.
Its success in attracting the Laos sovereign and its power company EDL Generation to the baht bond market has already drawn the attention of the Myanmar and Cambodian governments.
The PDMO and the MoF have given verbal approvals for Myanmar and Cambodia sovereigns to offer baht bonds.
"We have asked our local rating agencies to rate them," said Mr Suwit. "If the borrowers are sovereign or state-owned enterprises, then the local ratings are likely to be of investment grade."
Myanmar is exploring a potential baht bond, said banking sources, who added that an issuance would still be a long way off as the country prepares for its most widely contested general election.
A potential debt sale by the Cambodian government in Thailand has better prospects but will likely emerge only next year, said one banker deeply involved in preliminary preparations for the deal.